Melbourne land blocks dip below $200,000 but no dramatic falls expected: Oliver Hume

Gross Melbourne residential land prices remained unchanged during the June quarter at a median price of $210,000 with lot supply trending down for the first time in two years, according to the latest research by Oliver Hume.

Once rebates and incentives are factored in the net effective land price fell below the “magical” $200,000 mark for the first time since June 2010, the real estate group reported in its Melbourne Growth Area Land Market Report. 

Incentives included the $13,000 first-home buyer bonus for newly constructed homes, which ended on June 30.

Oliver Hume says that during the quarter, first-home buyer activity “underpinned the market, moving to a level higher than at the height of the incentive-led sales frenzy”.

“It will now move in line with the long-run trend, accounting for some 55% of all purchases.”

Two years ago, gross land prices were $187,500.

Over the six months to December 2010, prices rose by more than $38,000 or around $50 per day to peak at $225,750.

However, they have not risen since the June 2011 quarter.

According to Oliver Hume, the monthly project sales rate on the 18 Melbourne residential land projects launched to date this year remains relatively weak.

Report author Andrew Perkins highlighted that the trend of rising lot supply since the June 2010 quarter reversed in the June 2012 quarter, falling by about 7% to about 3,500 lots (a fall of about 260 lots) available for purchase.

"Almost half of these 3,500 lots are titled, up from around 35% last quarter," Perkins says.

"This creates a number of marketing challenges over the next six months for developers, not to mention the need to pay land tax and rates.

"Based on current project sales rates, the retail supply represents 5.6 months' sales; once again falling below the industry benchmark of six months (after exceeding the mark last quarter for the first time since the September quarter of 2006)." 

All municipalities except Hume experienced a fall in supply.

Oliver Hume counted eight new Melbourne projects launching over the June quarter to bring the year-to-date count to 18 projects with around 4,850 lots end-yield.

As a comparison, the six months June 2011 delivered 16 new projects and a fully developed yield of around 10,350 lots.

The biggest drop in lot supply over the quarter occurred in the Mitchell: Wallan - Beveridge municipality in the outer north, where there is now around 8 ½ months’ supply, down from just over 20 months in the March quarter.

Mitchell: Wallan – Beveridge has the cheapest gross median land price at $171,500 alongside Melton (in the west), with the most expensive being Wydnham at $242,000.

Oliver Hume noted this drop was due to stock being withdrawn from the market as opposed to an uplift in sales.

The City of Whittlesea was the only other municipality to be comfortably over the industry benchmark of six months, with eight months’ supply.

Casey and Hume are now the tightest markets.

Wyndham in the west with 34 projects has 24% of the new land market, followed by 31 in Whittlesea in the north (22% of the market).